HTC teams with Beats by Dr. Dre for mobile music

What began as a casual conversation on the beach in Malibu, the Beats by Dr. Dre concept of high-end headphones has emerged as a symbol of audiophile cool.

Five years ago, record label executive Jimmy Iovine and rapper-producer Dr. Dre were chatting at Dre's beach home. "My lawyer just called me up, and he wants me to sell Adidas sneakers," said Dre.

Iovine countered, "Dre, (expletive) sneakers. Let's sell speakers."

Both men lamented the decline in sound quality ushered in by the MP3 and iPod era.

"For convenience and speed, everyone sacrificed sound," Iovine says. Digital devices and headphones are to blame, he says. "The emotion of the music is almost unrecognizable to what is recorded in the studio," Iovine said.

Their initial goal, said Dre — who in addition to creating his own music, produces acts such as 50 Cent, Eminem and Snoop Dogg — was to bring to market headphones that reproduce "as close to the sound I hear in the studio as possible."

Mission: accomplished. And done so hip and attractively that Taiwan-based smartphone maker HTC announced Thursday it has invested $300 million in Beats Electronics, maker of Beats by Dr. Dre, for a 51% stake in the company.

For HTC, which is on the rise but competing with the likes of Apple, Motorola and Samsung, it offers a potential trendsetter edge.

"I can see why they would want to be associated with Beats," says Ted Marzilli, managing director of research firm YouGov's BrandIndex. "It potentially makes the brand a little bit more hip."

That's because Beats by Dr. Dre has emerged as a brand with swagger. Since the original $350 premium Studio headphones hit the market in 2008, produced with Monster Cable, subsequently released models have been created with musicians Lady Gaga, Sean "Diddy" Combs and Justin Bieber, as well as NBA star LeBron James.

The headphones are so popular that Beats is the No. 1 seller of $100-plus models — displacing previous leader Bose — and are fashionably worn in gyms and airports and on subways.

"Beats tell us the wearer is the hippest cat in the room," says anthropologist Grant McCracken, author of Chief Culture Officer.

The success of Beats headphones has led to Hewlett-Packard computers with built-in Beats Audio technology.

And, due out in the fall, the 2012 Chrysler 300S will be equipped with Beats Audio technology.

HTC has become a rising player in the smartphone marketplace with models such as its Evo 4G and Thunderbolt Android-based phones. Its latest, the Evo 3D, captures photos and videos in 3-D without the need for 3-D glasses.

Smartphone users are increasingly using their devices to listen to music and watch music videos, Chou says. He says the HTC-Beats combination brings together two companies that share a vision for high-end audio within the mobile experience.

The Beats team understands "music quality and (has) this vision to deliver the studio song quality to the consumer," Chou says.

Iovine sees mobile playing an even bigger part in music delivery. "In order for music to regain its foothold as an industry, music has to go to the telephone," he says.

Before Beats came along, Dre — born Andre Young — shied away from endorsements.

While he did not comment publicly on the HTC deal, he reminisced about the origin of Beats during an interview at the Consumer Electronics show two years ago.

"The seed was planted on my balcony at the beach," he said. "Basically, I've been approached by a lot of people trying to get me to start clothing lines, represent their clothing line or what have you, and it never felt right to me. This feels organic because it has to do with sound."

When Iovine recommended speakers over sneakers, Dre said, "I have this name — Beats — that I want to use for something."

Said Iovine, "OK, that's what it is: Beats by Dr. Dre."

The Beats name stuck, of course, and is appropriate for Dre because he wanted to capture the bass that was missing in other headphones.

"It's the sound that I hear in the studio, trying to get as close to that as possible in a headphone … really the bottom. There's no bottom in other headphones."

Audio and home theater accessory maker Monster Cable made 150 samples before Dre and Iovine saw any prototypes. "They went through 20 before it felt right," said Monster founder Noel Lee.

When asked what song he used to test the prototypes, Dre said 2003's In Da Club, the 50 Cent No. 1 hit he produced.

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